Another Significant Risk — Criminal Antitrust Enforcement

Under the radar screen of FCPA, UK Bribery Act and other aggressive enforcement actions, the Antitrust Division of the U.S. Department of Justice is continuing its steady tradition of aggressive criminal enforcement. Week after week, cartel activity is investigated, prosecuted and often settled. Recent statistics from the Antitrust Division confirm its aggressive approach: since 2007, the Antitrust Division have averaged more than 135 pending grand jury investigations, and in 2010, the Department of Justice filed 60 criminal antitrust cases. Assistant Attorney General Christine Varney has stated that the Division will not divert resources from criminal antitrust enforcement.

For corporate antitrust defendants, the division’s main enforcement tools remain criminal and civil fines. Criminal fines for 2010 totaled $555 million. While this is lower than in previous years, the decrease is more likely attributable to cyclical trends in case management, rather than a reduced emphasis on enforcement. The record $1 billion in fines in 2009 occurred as several pending investigations—air cargo, TFT-LCD panels, and others, began entering their final stages and defendants began entering guilty pleas. As additional investigations mature, criminal fines will likely return to these higher levels.

In addition to fines against criminal defendants, the U.S. Antitrust Division is continuing its policy of advocating for jail sentences for individuals involved in criminal antitrust violations. In 2010, 76% of individuals convicted for antitrust violations were sentenced to a period of imprisonment. The average jail term for these defendants was 30 months. Both statistics underscore the Division’s stated policy of aggressively seeking incarceration for individuals involved in antitrust conduct.

Indeed, since 2000, the Division has succeeded in significantly increasing both the percentage of convicted defendants sentenced to jail terms and the length of those sentences. Ten years ago, only 38% of defendants received sentences of imprisonment, and the average length of those sentences was only 10 months. The Division’s shift in policy, and the resulting impact on individual sentences, is expected to continue.

Recent years have also shown an increased emphasis on prosecuting foreign individuals, where their antitrust violations reach the United States. Since 1999, when the first foreign defendant was sentenced to serve time in a U.S. prison, over 40 other foreign nationals have received similar jail sentences.

The increase in antitrust enforcement has brought with it a rising interest in compliance programs. In particular, the U.S. Corporate Sentencing Guidelines include a sentencing reduction for an “effective compliance and ethics program.” Such a program can reduce a corporation’s “culpability score,” which in turn reduces their recommended fine range under the Guidelines.

A company’s participation in an antitrust conspiracy, however, raises questions about the effectiveness of any existing compliance program. Thus, there is a rebuttable presumption that a compliance program is not effective where high level personnel from a small organization, or persons with substantial authority in larger organizations, participated or condoned the inappropriate conduct. Consistent with this observation, the Sentencing Guidelines will not provide a culpability score reduction where there was unreasonable delay in notifying the government of an offense, or if high level personnel “participated in, condoned, or [were] willfully ignorant of the offense.”

Recent amendments to the Guidelines have attempted to add more flexibility to the compliance program provisions in the Guidelines. In November 2010, the corporate sentencing guidelines were amended to allow for the culpability score reduction where (1) persons with operational responsibility report directly to a governing authority or an appropriate subgroup thereof; (2) the compliance program detected the offense before discovery outside the organization, or before such discovery was reasonably likely; (3) the offense was promptly reported; and (4) there was no participation in the offense by anyone with operational responsibility for the compliance program. With these amendments, it again becomes possible for the culpability score reduction to play a more significant role in antitrust sentencings.